Generally, it is readily understood that demand for electrical energy is typically not at all constant, even in a coarsely defined sense, throughout the hours of a typical day. As such, there typically exist certain hours of each day when demand peaks at levels considerably higher than in the remainder of the day.
Generally, if utility companies buy energy during peak demand periods, then they pay a premium for transferring energy when the transmission lines are congested. Flat-rate electric tariffs shield most customers from fluctuations in energy costs, especially those caused by buying energy supplies on short notice. Utilities, however, are not insulated from these fluctuations. When the market rate for electricity rises above the approved retail rate, utilities are “caught in the middle”, which can be financially disastrous for them, as typically they are not able to pass price increases along to customers without regulatory approval.
In this general context, peak demand problems are felt particularly acutely among larger-scale customers, e.g., industrial customers, which may draw more power during the day than for an average customer. In other words, peak demand management may well end up affecting such larger-scale customers to a degree that has a direct impact on their ability to conduct business effectively, which itself may affect their own clients or customers. Because of special demands and characteristics brought by data centers in particular, peak demand issues may lead to very significant problems, to debilitating effect, if not properly addressed.